Sunday, 1 November 2015

Stories we should be thinking about

'Activity in China's manufacturing sector unexpectedly shrank
for a third straight month in October, an official survey showed on Sunday,
fuelling fears that the economy may be cooling further in the fourth quarter
despite a raft of stimulus measures.

The official Purchasing Managers' Index (PMI) was at 49.8 in
October, the same pace as in previous month and lagging market expectations of
50.0'.

Meanwhile @eurofaultlines noted that SMEs were bearing the brunt of any slowdown in the country:

Excellent chart via @Fmirw showing not only the super slow bounce back in Eurozone growth...

...but also the lack of dynamism in lending too despite one bout of QE:

Does make you wonder if Europe is sleepwalking into a Japan-style crisis. Talking about the latter @jsblokland highlighted this chart reflecting the now majority ownership by the Bank of Japan in the overall Japanese ETF market. Simply a stunning distortion:

Of course central bankers do have a difficult job...which is why Bloomberg developed for them a snakes and ladders game (link here).

I would say the biggest risk for the even the Federal Reserve and the Bank of England as seen by economic disclosures over the last week (and as I noted in the latest Financial Orbit Speaks - link here) is a lack of economic growth...

Mario Draghi in an interview published earlier in the weekend notes many of the above issues:

'The risks are therefore certainly on the downside for both inflation and growth, also because of the potential slowdown in the United States, the causes of which we need to understand fully...The lower bound of the interest rate on deposits is a technical constraint and, as such, may be changed in line with circumstances'

Got to keep thinking about Greece however as this story on Seeking Alpha noted:

'Greece's four biggest banks, which suffered severe losses
this past summer, must raise €14.4B ($15.9B) in new money to withstand any new
crisis, the European Central Bank said on Saturday.Although the banks are
currently been kept afloat by access to money through the eurozone monetary
system, there is a rush to get recapitalization completed.If it's not done by
the end of the year, new EU regulations would mean large depositors may have to
take a hit to their accounts'

Meanwhile staying in southern Europe returns suggest in today's Turkish election the AKP will win back the absolute
majority it lost in the June elections. So Erdogan's strategy worked...remarkable really given this which appeared pre-election in the Weekend FT:

A significant factor in the decline of the quality of jobs
in the United States has been employers’ increasing reliance on “non-regular”
employees — a growing army of freelancers, temps, contractors, part-timers, day
laborers, micro-entrepreneurs, gig-preneurs, solo-preneurs, contingent labor,
perma-lancers and perma-temps…This practice has given rise to the term “1099
economy,” since these employees don’t file W-2 income tax forms like any
regular, permanent employee; instead, they file the 1099-MISC form for an IRS
classification known as “independent contractor.”

A couple of stunning merger and related charts from this report. Yes 2015 looks as if it will be a bigger merger year than 2007...

...and look at that goodwill!

However The Financial Timesnotes that whilst the value of deals is high...the volume during October was at a 20 year low:

'October has been a deceiving month. With $514bn worth of
deals unveiled, it was the fifth-biggest month in M&A history in dollar
value, according to Thomson Reuters data. Including Pfizer’s early talks to buy
drugmaker Allergan, which could cost more than $125bn, October could beat the
all-time record of $530bn worth of deals hit in June...However, the total number of deals last month was just
2,177, nearly 40 per cent lower than the average 3,521 for the period from January
to September, according to Thomson Reuters data. The last time M&A was so bad in October was in 1996,
with only 2,066 deals'

The 'smart money' doing well over the last decade (not!)

I liked this: 'I tried to survive an entire day using WeChat to pay for
stuff. Here’s how it went' (link here)

Interesting article on rising UK local government pension scheme deficits in The Financial Times which quoted @JohnRalfe1:

'John Ralfe, an independent pensions expert, pointed out that
the data did not include an estimate of liabilities and therefore provided only
a partial view of the health of LGPS members.

“I estimate that pension liabilities rose faster than
assets, increasing the deficit for the 81 LGPS members in England to a whopping
£90bn from around £83bn at the end of March 2014” '

Company-related observations:

Banking sector technological simplification in action.

Really good via @visualcap on technology deals that did not happen hit/misses:

A few corporate stories from The Sunday Times:

'Glaxo boss faces investor ire...must allay concerns about Glaxo's pipeline of new medicines at an investor meeting in New York on Tuesday. It will be the first time in 12 years the company has given extensive details of the drugs it is developing'

'GKN pleads for state cash on new A380...it is unclear how much the company wants from the government to support the revamp'